Elon Musk – the charismatic capitalist putting his business on the line
Elon Musk looks like he’s bored, and it’s making him irritable and erratic. This would be frustrating if he were a teething toddler and understandable if he were an unemployed 4chan dweller, but is incomprehensible given he is the founder and CEO of two companies together valued at around $100bn (£77.7bn) – one of which is going through a year that will make or break it.
Musk achieved fame, and garnered a fanatical online fanbase, through his founding of Tesla – a motoring company that hit on the insight of starting electric cars at the high, not low, end of the market, creating vehicles with years-long waiting lists that thousands wanted, despite their prohibitive price tags.
His company won plaudits for its impressive, ahead-of-the-curve battery technology, and for the scope of its founder’s ambitions. The company now promises a mass-market electric car that will retail for $35,000 (£27,000).
This ambition has led Tesla (at a market cap, or valuation, of $64bn/ £49.7bn), a carmaker just 15 years old, to be valued far more highly than Ford ($40bn/£31bn), Nissan ($38bn/£29.5bn), and Fiat-Chrysler ($26bn/£20bn).
This is more impressive still given that the latter three companies all had sales up to around 10 times’ higher than Tesla’s and each made billions in profit – while Tesla lost nearly $2bn (£1.5bn). Investors aren’t valuing Tesla for what it’s achieving today, but rather for their high, high hopes in what it will do in the future.
That relies on making a success of Model 3, and producing cars quickly and reliably enough to satisfy the market – and to stay ahead of its much bigger rivals, who are catching up quickly in the electric car market.
Tesla is struggling to hit its production targets, and having quality concerns in the scrabble to hit them. It is struggling with the aftermath of a takeover of SolarCity now regarded as ill-advised. And critically, it’s burning through around $1bn (£776m) in cash every quarter, against a debt pile already in excess of $11bn (£8.5bn). It’s crunch time.
So then, sensible investors must be worried at their CEO’s increasingly erratic behaviour, and apparent lack of concentration in his core project. Over the past few years, Musk has launched an acclaimed space company, SpaceX, which plans to send humans to Mars. He has publicly drawn blueprints for a wildly impractical and expensive “hyperloop” transit system, then given them away. He proposed a series of underground platforms to shuttle cars, to beat traffic, launching the Boring Company” to lay the groundwork – only to go on and use it to sell a limited-edition range of 20,000 flamethrowers to the general public. He suggested fixing fake news by creating a system to rank outlets (which would be immediately gamed by trolls) called Pravda. And then he created a totally useless “submarine” to “help” rescue boys trapped in a cave in Thailand, and then baselessly called one of the actual rescuers a “pedo” when he criticised Musk’s intervention.
These are not the actions of a man relentlessly focused on fixing production and financial issues in the core company he leads, and in which investors place their hope. And his distraction and irritation appears to be showing: in a recent call with analysts – a requirement of his job as CEO of a listed company – he openly displayed his annoyance, even cutting one off the call, an unusual and very rude act in such rarefied circles, and one that caused the share price to drop.
And then yesterday he tweeted that he had a plan to take his company off the stock exchange, and make it a private fiefdom once more, even claiming that he had lined up investors to do so – at the price of $420 (£325) a share, with no indication of whether the figure was a joke or not.
If this were a serious takeover bid, it would be worth $72bn (£56bn) and require serious private equity and debt backing – and so would be an astounding thing to announce via Twitter, with no details of the plan or its timing. This is doubly so given that Tesla already has a lot of debt and burns through cash, rather than generating it – it is simply not the type of company that would typically be taken over in this way. And yet Musk’s “bid” was taken seriously enough to send Tesla’s share price soaring.
If Musk was joking, that too is dangerous. He is the CEO of, and major investor in, a listed company – and there are strict rules against him manipulating the stock price of his company, which the US regulator (the Securities and Exchange Commission) is mandated to guard. With the share price hiked after his announcement, Musk caused a headache for short-sellers, clearly a potential conflict of interest and market interference, and one the SEC is sure to watch closely.
All of this spells a headache for Musk and his board of directors. Running a major company means being beholden to your investors, your employees, your debtors, and to the rules and laws that govern you. That might not be fun, but it is how things are done to prevent thousands or millions getting hurt – but our current era of charismatic capitalists threatens to undermine the whole system.
In normal circumstances, CEOs who refuse to live by those standards get ousted – but thanks to the tech boom and the veneration of founders, Musk is chairman, CEO, and largest shareholder – and everyone else is riding the tiger. They may have no choice but to hang on or lose their money – but how many now are hoping they could get off ?
•James Ball is a former Guardian special projects editor, and the author of Post-Truth: How Bullshit Conquered the World